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  • Writer's pictureJulie Skye

This 3rd Week of November 2022 Thoughts

Fed Fund Watch: the 10-Year Note was 4.175 last week and is now 3.89

I’m reviewing portfolios for tax loss selling to help your 2021 taxes.

RMD Countdown we can still take charitable contributions from your IRA.

Wells Fargo Faces Huge Fine After Latest Scandal- If you bank with Wells Fargo you've noticed that the bank just can’t seem to stay out of hot water. The last few months have seen the bank's name in headlines for a lot of very no good reasons. This is about the G in ESG!

In case you missed it last week, CLICK HERE for VegTech "Angels" vs SIN Smack down.

No, “That’s Not What Jerome Powell Just Told You!” JPMorgan’s Bill Eigen Warns Investors Not to Jump Back Into Fixed Income. “All I do is just listen to the Fed, and I believe them,” says the manager of the Strategic Income Opportunities Fund.

Bond managers are scratching their head with the market’s reaction to the latest inflation data released last Thursday. A tiny…a 0.3% increase in the consumer price index was just a small amount less than what economists expected. It kicked off a huge rally in stocks AND bonds. In between laughs, Bill Eigen, a JPMorgan fund manager, had a lot to say about how wrong investors are in their interpretation of the inflation data. “The market response means the Fed’s done, and they will stop raising rates.

Why it matters: Signs of trouble are clear, he said, even if no one is paying attention. High yield bonds are at 8% and this implies there will be no defaults, and all is sunny in the economy. Eigen isn’t buying it: despite the rally, inflation is not coming down in a material way anytime soon. Defaults have begun, and junk bond issuers aren’t getting deals done. Why are we so grim? With rates so low for so long, investors fell for strategies that promised more yield without more risk. “My military dad always said, ‘at some point you gotta pay the price for the things you’ve done.’”

Why does it matter to you? Not a day goes by that I don’t struggle with the question, “Is it time to add to your bonds?” Read more here: Should we buy bonds now? And more than when to buy bonds…is when to buy stocks. Tough questions.

While the bear market sell-off meant we have negative returns so far this year, the question we need to ask is what kinds of stocks will take the lead in the next cycle? We don’t know how long the bear market will last but today, we need to be looking at market leadership: will 2021 winners be the 2023-2024 winners? There will be a different economic backdrop than the one we’ve had in recent decades: an end to low inflation, low interest rates, a stable, rising market and long periods of economic growth.

That doesn’t mean rates will stay as high and while inflation is expected to decline, I do not expect to ever return to 0% interest rates. There are, however, hints of what new leadership could look like following the most recent low hit on Sept. 30. This Quarter, the highest market’s gains were in value stocks (think Black Friday deals) from the financial services, industrials, energy, and healthcare sectors. Compare the 2021 returns for the S & P sectors, with this year’s gains: what jumps out? How different they were.

Why does it matter to you?You can never just “set it and forget it” with portfolio management. Keep looking above at the top leaders for 2021 and 2022; the reality is that just buying what won last year is like driving by looking in your rear-view mirror. Our challenge today is to look where the puck is going…and when it is safe to go back into the water.

Australia - the world's greatest lithium supplier: The Greatest LithiumMine of All As demand soars for electric vehicles and clean energy storage, Australia is rising to meet much of the world's demand for lithium. While this helps reduce the need for fossil fuels, it raises another question – how can we source lithium sustainably? A three-hour drive south of Perth, Western Australia, behind the historic mining town of Greenbushes, the land beyond the town's primary school falls away to reveal a deep, grey scar 870 feet deep. The terraced wall of the pit has a history of 100 years of digging some sort of metal.

In 1980, another metal was found at Greenbushes: a soft, silvery-white reactive alkali metal that was a geological oddity...lithium. A small-scale mining operation began in 1983, extracting lithium to use in glass making, steel, castings, ceramics, lubricants, and metal alloys. Decades later, everyone began looking under rocks, literally, for lithium. Today the Cornwall tin pit is closed for business: Greenbushes has become the largest lithium mine in the world. Demand for lithium could grow to more than 40 times current levels if the world is to meet its Paris Agreement goals.

By 2040 the International Energy Agency expects demand for lithium to grow more than 40 times current levels if the world is to meet its Paris Agreement goals. This new lithium-rush has helped Australia positioned itself to be the world's go-to supplier. But I’m worried, as you are…how sustainable is lithium mining? While Greenbushes contributes 40% of Australia's lithium mine there are several others close behind. Four other hard-rock lithium operations and two other mines are in planning with other proposals at various stages of development.

Why does it matter for you? It is going to take all the greatest minds in the world to help manage the transition to sustainable batteries and renewable energy. Nothing today is the final answer…so just know we’ll be buying into this mega-trend.

Required Disclosures: Always read the fine print! This content reflects the opinions of Julie Skye and is subject to change without notice. This content is for informational and entertainment purposes, and it is not a recommendation regarding the purchase or sale of any security. There is no guarantee that any statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Securities investing involves risk, including the potential for loss of principal. There is no assurance any investment plan or strategy will be successful.

Julie is an Investment Advisor Representative of Sustainable Advisors Alliance, LLC (SAA, LLC): Advisory services are provided by SAA, LLC. Registration with the SEC does not imply a certain level of skill or training.

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